It looks like you are trying to collapse the workspace and project into a
single directory. That is not something that Eclipse allows. How did you
create your starting structure? The typical structure is
<workspace.root>/<project.root>, but you can also have the project root be
somewhere else on the file system. What is not allowed is workspace.root
== project.root.

If the myproj directory is where you ultimately want to build your webapp,
you need to pick another directory to be your workspace root. I would
close eclipse and delete .metadata folder in the myproj directory. After
that step re-open eclipse and pick a different workspace directory. The
easiest thing to do is to use the parent dir of myproj.

That's interesting. I am wondering is it possible to import a war into a
dynamic web project and hence expand that war into that dyanmic web
project and not create another web project inside the existing dynamic web
project?